SALTA, ARGENTINA – Yesterday, we visited the museum in the center of Salta.
It is a museum of the history of the city and the province, set in the repurposed town hall in the main square.
We had begun the day by going to mass in the old cathedral across the square – an ornate and opulent example of Spanish colonial architecture.
The cathedral is magnificent. It is a classic cruciform building with barrel-vaulted ceilings and a large cupula in the center.
Behind its altar, in the apse, is one of the most spectacular, over-the-top sanctuary adornments we have ever seen.
There is so much gold leaf over so many decorative elements, sparkling, shining, reflecting light in every direction; it takes your breath away.
Salta had never seemed like an attractive city.
But yesterday, we were surprised. After mass, we stopped for coffee at one of the outdoor cafes on the plaza.
The arcaded square – with the cathedral on one side and the town hall on the other – was splendid. In the center was a park with palm trees, green grass, and a huge granite monument.
Couples necked on the benches and families with young children strolled by. Nearby, a blind accordion player gave us fine renditions of tango favorites. The weather was perfect.
The museum is large with collections focused on three periods.
There is the pre-Hispanic period, with clay pots, arrowheads, and petroglyphs, some thousands of years old. Then there is a display of the colonial period followed by one of the War of Independence.
It was the colonial period we found most interesting. In particular, one room showed us samples of money used in the colonies and explained a bit about how the economy of the era worked.
We learned two things that may be of interest.
First, phony money always causes problems.
Second, “Spain First” didn’t work well back then, either.
To put these insights in perspective…
Francisco Pizarro and his army had butchered 2,000 Inca in the Battle of Cajamarca in 1532.
But his motley crew of adventurers and desperadoes were soon at each other’s throats, jealous of each other’s booty, fame, or honors.
Six years later, Pizarro defeated his former partner Diego de Almagro in battle… and had him garroted and then beheaded. Later, Almagro’s followers assassinated Pizarro.
The best way to deal with this restless and murderous energy was to channel it into more exploration and conquest. There were more cities of gold to be found, they believed… and so they set out.
In 1582, Salta was founded by Spanish conquistador Hernando de Lerma. The Inca had conquered this area of present-day Argentina about 100 years before the Spanish arrived.
Rather than reconquer it, the Spanish simply took over from the Inca, leaving the locals as vassals. Other conquistadores romped through what is today Peru, Bolivia, and Chile, leaving the Spanish crown with a vast empire in the New World.
The immediate and obvious effects were beneficent. Longer-lasting and less obvious consequences were not. Especially when the Spanish made their Trumpish policy decisions.
The New World was literally a gold mine for the Spanish crown.
Pizarro demanded the Inca fill a room about 22 feet long, 17 feet wide, and 8 feet high with gold, and twice with silver, over several months as the price for letting the captive Inca emperor, Atahualpa, go free.
The Inca dutifully filled up the room. But Pizarro had Atahualpa strangled anyway.
The first ships, riding low in the water with heavy cargoes of gold and silver, were not long in leaving for the royal treasury in Spain.
Free money, like free love and free booze, is thrilling – at first. The headaches come later.
The gold, arriving from the New World, greatly increased the money supply in the old one. Prices rose, slowly, all across Europe… with the general price level up 500% from 1550 to 1700.
In Spain, though, the damage was much greater. The free money made many of richest and best-connected families richer still – without additional work or effort.
Without producing anything, they were then able to buy goods and services. Economic historians claim that this led to a decline in Spain, leaving it the “poor man of Europe” for the next 300 years.
As Spaniards became accustomed to the influx of new money, they needed more and more of it to keep up with rising prices.
According to the museum in Salta, this led them to squeeze every ounce of gold… and later silver… from their colonies.
So although Spain soon had too much money, Salta had too little. This forced the royal governors to operate an economy without real money. Instead, it declared base metals – copper, iron, etc. – as “money.”
The short explanation alongside the display of colonial coinage describes the results: The phony money did not provide accurate and stable price information; it did not give people a way to preserve and protect their wealth; “it created much confusion and many errors.”
In short, it did what the credit-based U.S. dollar has done since the 1970s. You could buy the average house in 1970 for about $25,000. Now, it’s about $200,000 – seven times more.
Plus, the phony dollar has distorted the rest of the economy, created bubbles, misdirected investments, and wasted valuable time and resources.
Nothing new there, in other words.
The other thing that greatly retarded economic progress in the Spanish colonies was the “Spain First” policy.
Then, like now, the crown and the cronies thought they could gain an advantage by forcing people to trade on their terms. They wanted win-lose deals, with themselves as the winners.
So they set up a monopoly on trade with the colonies – carefully controlled so that only Spain (and its insiders) could benefit.
This, too, led to the inevitable consequences.
The museum commentary tells us that all trade had to be funneled through specific ports, such as Buenos Aires, where it was approved and taxed by royal administrators.
Shortages, delays, and higher prices on both sides of the trade resulted. It also helped create an entire industry whose purpose was to dodge the regulations.
Foreign ships, foreign entrepreneurs, and foreign bankers were soon gaming this system, establishing their own system of contraband commerce.
“Spain First” slowed economic growth in the Spanish colonies. But it probably sped up the development of Britain’s hustling merchant fleet.
Market Insight: French Investors “Sell the News”
BY CHRIS LOWE, EDITOR AT LARGE, Bonner & partners
It’s a classic case of “buy the rumor, sell the news.”
Yesterday, France elected a new president, centrist Emmanuel Macron.
He defeated far-right populist Marine Le Pen, who wanted to hold a referendum on France’s membership in the European Union and the euro currency.
In the run-up to yesterday’s vote, investors placed bets that a Macron win would be good for the French economy.
This pushed France’s “Dow,” the CAC 40, to a nine-and-a-half-year high.
But as you can see from today’s chart, after news of Macron’s victory on Sunday, the French market is down nearly 1% today.
It is an important lesson for anyone tempted to “trade the news.”
By the time a piece of news breaks, it is already fully expressed in stock prices.
And all the gains to be made have already been made by investors who placed their bets ahead of the event.
– Chris Lowe
American Malls Are Changing Tactics
Brick-and-mortar retailers continue to lose customers to web-based companies like Amazon.com. But malls are using the one thing their online competitors don’t have: parking lots.
There’s Now an Apple-Picking Robot
A robotics company recently created a machine that can identify and pick ripe apples from orchards. Will automation make seasonal farm workers a thing of the past?
How to Fight Back in the War on Cash
Bill has often warned about the “War on Cash,” the disturbing trend of governments attempting to control your money. But now there’s a secret weapon to guard your financial privacy…
Bill’s Friday essay, “The 21st Century Has Been a Big, Fat Flop,” has gotten one reader thinking…
Robots, machine automation, and software are replacing humans faster and faster. It is an issue that must be confronted sooner rather than later. When there aren’t enough jobs with a living wage, what then? It will push legislation toward socialism to realign wealth.
Retraining hundreds to service automation is a losing proposition. And becoming a service economy is a joke. We can’t prosper by doing each other’s laundry.
As far as the blond comb-over goes… one must watch what he does, not what he says. He continues to campaign with his fake news Twitter crowd. Watching what he does indicates he is with the military-industrial complex. Case closed.
– Bernard B.
Meanwhile, one reader shares thoughts on Chris Lowe’s recent insight on the declining number of working-age men in the labor force.
Chris Lowe writes about “a shocking collapse of work for men in America”. But since the labor force participation rate of working-age American men only includes those between 25 and 54 years old, it ignores the vast number of baby boomers 55 and older who remain in the workforce.
– Tom C.
Chris’ Comment: It’s a great point. Although roughly 7 million Americans between the ages of 25 and 54 have completely exited the workforce, a growing number of retirees are still working.
According to Pew Research, as of last May, about 19% of Americans over the age of 65 – or nearly 9 million people – are employed full or part time. That’s up from about 4 million people over 65 working in 2000.